Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies in different asset classes. Despite the popularity of portfolio sorting, little attention has been paid to the statistical properties of the procedure or to the...

The main objective of this paper is to quantify the effect of expectation changes about discount rate and dividend growth rate over the Chilean market portfolio returns. The model applied was taken from the works of Campbell and Shiller (1988, 1988a), Campbell (1991) and Campbell and Vuolteenaho...

Financial markets are typically characterized by high (low) price level and low (high) volatility during boom (bust) periods, suggesting that price and volatility tend to move together with different market conditions/states. By proposing a simple heterogeneous agent model of fundamentalists and...

This study presents and empirically tests a simple framework that examines the effects of market liquidity (the ease with which stocks are traded) and funding liquidity (the ease with which market participants can obtain funding) on stock market bubbles. Three key findings emerge from this...

This paper introduces Quasi-Maximum Likelihood Estimation for Long Memory Stock Transaction Data of unknown underlying distribution. The moments with conditional heteroscedasticity have been discussed. In a Monte Carlo experiment, it was found that the QML estimator performs as well as CLS and...

This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks. I introduce an affine jump-diffusion model, which accounts for both the factor structure of asset returns and that of the variance of idiosyncratic returns. The estimation is...

We present a new approach to identifying asset price bubbles based on options data. Given their forward-looking nature, options are ideal instruments with which to investigate market expectations about the future evolution of asset prices, which are key to understanding price bubbles. By...

The VIX index is not only a volatility index but also a polynomial combination of all possible higher moments in market return distribution under the risk-neutral measure. This paper formulates the VIX as a linear decomposition of four fundamentally different elements: the realized variance...

Using daily data, this paper empirically investigates the price discovery and information transmission in China's stock index futures and spot markets based on a VAR-GARCH model with SSAEPD margins. By comparing our model with classic VAR-GARCH model, we discover that our model can better...

This paper provides tractable expressions for broad classes of standard transforms for the case of affine jump diffusions. Extending and unifying existing results, these include expressions for exponential, polynomial-log-linear, and polynomial transforms of a state vector in both conditional...